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The zones of discrimination for M-Score is as such:
An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.
During the past 13 years, the highest Beneish M-Score of Alpha Natural Resources Inc was -1.48. The lowest was -4.09. And the median was -2.80.
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.
The M-Score Variables:
The M-score of Alpha Natural Resources Inc for today is based on a combination of the following eight different indices:
|M||=||-4.84||+||0.92 * DSRI||+||0.528 * GMI||+||0.404 * AQI||+||0.892 * SGI||+||0.115 * DEPI|
|=||-4.84||+||0.92 * 1.2613||+||0.528 * 0.6034||+||0.404 * 0.6659||+||0.892 * 0.8655||+||0.115 * 1.0149|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1054||+||4.679 * -0.0806||-||0.327 * 1.1198|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $314 Mil.|
Revenue was 1070.615 + 1050.592 + 1054.098 + 1111.773 = $4,287 Mil.
Gross Profit was 133.046 + 55.79 + 103.121 + 65.793 = $358 Mil.
Total Current Assets was $1,876 Mil.
Total Assets was $10,736 Mil.
Property, Plant and Equipment(Net PPE) was $8,342 Mil.
Depreciation, Depletion and Amortization(DDA) was $844 Mil.
Selling, General & Admin. Expense(SGA) was $152 Mil.
Total Current Liabilities was $1,010 Mil.
Long-Term Debt was $3,720 Mil.
Net Income was -121.661 + -184.975 + -512.627 + -55.698 = $-875 Mil.
Non Operating Income was 6.573 + 16.814 + 0.74 + 249.683 = $274 Mil.
Cash Flow from Operations was -30.711 + 17.861 + -217.048 + -53.961 = $-284 Mil.
|Accounts Receivable was $288 Mil.
Revenue was 1093.7 + 1191.094 + 1335.123 + 1333.591 = $4,954 Mil.
Gross Profit was 75.75 + -54.53 + 70.629 + 157.584 = $249 Mil.
Total Current Assets was $1,988 Mil.
Total Assets was $11,799 Mil.
Property, Plant and Equipment(Net PPE) was $8,956 Mil.
Depreciation, Depletion and Amortization(DDA) was $921 Mil.
Selling, General & Admin. Expense(SGA) was $159 Mil.
Total Current Liabilities was $1,243 Mil.
Long-Term Debt was $3,398 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(314.015 / 4287.078)||/||(287.655 / 4953.508)|
2. GMI = Gross Margin Index
Measured as the ratio of gross margin in year t-1 to gross margin in year t.
Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(55.79 / 4953.508)||/||(133.046 / 4287.078)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (1876.314 + 8341.974) / 10736.148)||/||(1 - (1988.424 + 8956.154) / 11799.258)|
4. SGI = Sales Growth Index
Ratio of sales in year t to sales in year t-1.
Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.
5. DEPI = Depreciation Index
Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.
DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.
|DEPI||=||(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1))||/||(Depreciation_t / (Depreciaton_t + PPE_t))|
|=||(921.294 / (921.294 + 8956.154))||/||(844.267 / (844.267 + 8341.974))|
6. SGAI = Sales, General and Administrative expenses Index
The ratio of SGA expenses in year t relative to year t-1.
SGA expenses index > 1 means that the company is becoming less efficient in generate sales.
|SGAI||=||(SGA_t / Sales_t)||/||(SGA_t-1 /Sales_t-1)|
|=||(152.106 / 4287.078)||/||(158.987 / 4953.508)|
7. LVGI = Leverage Index
The ratio of total debt to total assets in year t relative to yeat t-1.
An LVGI > 1 indicates an increase$sgai= in leverage
|LVGI||=||((LTD_t + CurrentLiabilities_t) / TotalAssets_t)||/||((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)|
|=||((3719.519 + 1009.549) / 10736.148)||/||((3398.434 + 1242.815) / 11799.258)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(-874.961 - 273.81||-||-283.859)||/||10736.148|
An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.
Alpha Natural Resources Inc has a M-score of -3.14 suggests that the company will not be a manipulator.
Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations
Alpha Natural Resources Inc Annual Data
Alpha Natural Resources Inc Quarterly Data